Transparent Investment Postmortem
Explain wins and losses candidly, then refine the process through team review
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 96%
This framework converts periodic reporting into a disciplined learning exercise. Before the period ends, the writer identifies major themes; after results arrive, the team determines which positions materially helped or hurt. The first draft states what the decision-maker genuinely wants to say, including failed theses and losses. Colleagues then fill factual gaps, challenge interpretations, identify inappropriate claims, and refine the account through several editing cycles. Each postmortem compares the original expectation with what actually occurred and distinguishes sound reasoning from luck or error. The process assumes that even excellent investors will be wrong regularly, so concealing a loss wastes information already visible in the results. Candid reporting strengthens institutional memory, helps improve future decisions, and gives stakeholders a more credible explanation of performance.
Origin
Extracted from Masters in Business through David Einhorn's description of how he writes Greenlight Capital's quarterly letters and discusses failed investments.
Core principles
- 01Discuss unsuccessful decisions as openly as successful ones
- 02Separate decision quality from unavoidable uncertainty
- 03Treat losses as reportable facts rather than embarrassments
- 04Begin with an unfiltered account of what happened
- 05Use colleagues to correct gaps, excesses, and inaccuracies
How to run it
- 1
Identify material outcomes
Determine which positions, decisions, and external themes most affected the period's results.
Pro tip Focus on decisions large enough to influence performance or reveal a reusable lesson.
Watch out Do not fill the review with immaterial activity that obscures the consequential choices.
- 2
Reconstruct the original thesis
Record what was expected, why the position was taken, and which conditions were supposed to create the result.
Pro tip Use contemporaneous research rather than relying only on memory.
Watch out Hindsight can make the original uncertainty appear smaller than it was.
- 3
Compare expectation with reality
Explain what actually happened and whether the result came from thesis accuracy, execution, external events, or luck.
Pro tip Evaluate winning decisions as critically as losing ones.
Watch out A profitable outcome does not prove that the reasoning was sound.
- 4
Draft candidly
Write an unfiltered first account, explicitly acknowledging losses and incorrect judgments.
Pro tip Use plain language about what failed and how much it mattered.
Watch out Do not replace analysis with self-justification or vague market commentary.
- 5
Run team review cycles
Ask colleagues to fill gaps, correct facts, challenge interpretations, and remove statements that should not be published.
Pro tip Include reviewers close to the research and reviewers with independent distance.
Watch out Editing should improve accuracy without sanitizing the failure.
- 6
Convert findings into changes
Record the lessons, warning signs, or process modifications that should influence future decisions.
Pro tip Assign a concrete owner when the lesson requires a procedural change.
Watch out A postmortem that produces no retained lesson is merely retrospective storytelling.
In the wild
A fund invests in a company expecting operational improvement, but execution deteriorates and the position loses substantial money. Its quarterly letter restates the original thesis, describes what failed, acknowledges the loss plainly, and records which evidence should have prompted an earlier reassessment.
→ Investors receive a credible account and the research team preserves a usable lesson for future positions.
A position produces a large gain after an unexpected industry event. The team compares the original thesis with the actual driver and recognizes that much of the gain came from luck rather than the forecasted mechanism.
→ The team avoids reinforcing a weak process merely because the outcome was profitable.
Common mistakes
Hiding losses behind aggregation
Discussing only total performance prevents stakeholders and the team from understanding which decisions failed.
Treating every win as skill
Successful outcomes can arise from luck, so wins require the same thesis-versus-reality comparison as losses.
Editing away the lesson
Review cycles become counterproductive when they sanitize errors instead of improving accuracy and clarity.
Is it for you?
Best for
It is best for investment teams and decision-makers who need to learn systematically from both wins and losses.
Not ideal for
It is not ideal for organizations that punish all acknowledged errors or use postmortems primarily to assign blame.
From the transcript
“The first draft is what I want to say. It's unedited and unfiltered, and then I pass it off to the team and they fill…”
“If something goes great, explain why it went great. If it didn't go well and we lost money on it, just say so”
“It's in the result anyway, so you may as well describe it.”
From the episode
David Einhorn: Market Structures Are Broken
David Einhorn